Beyond the Hype: Making Mobile Payments Work

A challenging market

The mobile payments (m-payments) market can be divided into two clear areas of activity: remote m-payments, where two parties are able to send and receive or exchange funds using the mobile channel, irrespective of where they are located; and contactless m-payments, where the mobile device needs to be 'waved' in close proximity to a point-of-sale (POS) terminal. The European Payments Council (
) aims to support the advancement of both markets to ensure the development of a sustainable infrastructure. To understand the priorities of the
, it is important to understand the challenges faced by this industry, some of which can be summarised as follows:

The establishment of a new cohesive ecosystem. As with any emerging technology, different approaches need to be taken by organisations to test the market and understand what works and what does not. At the same time, however, this can create proprietary 'closed' solutions and the implementation of 'bridging' technologies which support short term goals, but are not necessarily scalable. The result however should be long-term sustainability and flexibility for future market and regulatory needs.

The continual and rapid advancement of the technology. Mobile technology offers vast potential and is evolving at a significant pace; no-one quite knows the ultimate offering of this platform. From a business planning perspective this creates two problems: due to the resource investments made, organisations need to be sure that an implementation is profitable; and the solution has to be adaptable to future market requirements, regulatory changes and unknown malicious threats.

In addition to the advancement of the technology, the way people communicate and interact with each other is also changing. Social media is an example of this. Payment technology will also need to support financial transactions on this medium, such as person to person payments, and typically the mobile device will be one of the preferred platforms.

The integration of new market participants. As a new ecosystem, m-payments present opportunities for new technical and business stakeholders. For example, the role of the trusted service manager (TSM), which is a technical partner(s) that supports banks and mobile operators by facilitating the secure management and provisioning of m-payment applications. The integration of these stakeholders requires clear roles and responsibilities as well as the highest level of service and security to the end-user.

The need to develop the whole package. To ensure m-payment technology reaches its full potential it is important that all elements of the ecosystem are considered. As an example, the ability to make m-payments is important but the solution offers so much more in terms of advertising and brand engagement. For instance, loyalty points can automatically be aligned with payments with no need to carry a separate plastic card, or an NFC-capable poster can be used to promote a local retail outlet, sending a short message service (SMS) with directions and a discount directly to the mobile handset.

Customer focus

With all these factors to consider, it is also important to remember that the key focus needs to centre on the end-user and his/her expectations; consumers want to make payments when and where it suits them and mobile technology has the potential to achieve ultimate user convenience. To ensure an attractive ecosystem is established and convenience delivered, interoperability has to be achieved. For example, from a contactless m-payment perspective, every m-payment enabled handset needs to work with every contactless POS terminal. If such choices are restricted, it will limit the appeal of the technology.

Banks and payment institutions also need to ensure that the right framework is in place to support the delivery of 24/7 m-payment services. This includes regulatory expectations, security, real-time availability and the over-the-air lifecycle management of applications once live in the field. For many stakeholders this will require additional resource investment.

The
aims to contribute to the evolution of a sustainable mobile ecosystem

As the proliferation of mobile phones continues and service levels increase throughout the European Union (
), the mobile phone is considered an ideal platform for Single European Payment Area (
) payment instruments. The
is engaged in m-payments to support the convergence of different markets and the advancement of this next generation payment platform. Its aim is to avoid further market fragmentation, achieve market interoperability and establish cross-stakeholder cooperation. With the development of
, there is also an expectation from
stakeholders - consumers and merchants - that a Europe-wide and consistent landscape is not only created, but also maintained long-term. The
aims to work with industry to facilitate this by establishing the necessary standards to initiate and receive credit, debit and cards payments through mobile devices.

The development of standards and rules on cooperation in the customer to bank space is particularly important to ensure that responsibilities are defined and the highest level of security is provided, without impacting innovation or competition between players. As many new commercial relationships are being formed, with no benchmark to work from, the development of guidelines and specifications also offers the market the reassurances required and inspires confidence.

With its intention to create a service framework sufficient to reach potentially all payers/payees in the European Economic Area and to create a secure environment for the multiple players, the
has, and will continue to provide the market with a number of documents. These have not been created in isolation, but in collaboration with other key technical and business associations operating in this space to mitigate the risk of standards fragmentation, and after public consultation.

The next significant deliverable from the
is its forthcoming publication, 'Mobile Contactless Payments Interoperability Implementation Guidelines', which is expected in the fourth quarter of 2011. This document builds on
's previous work to focus on the interoperability of processes in the contactless m-payment application lifecycle management, when the m-payment application is stored on one of three secure elements (SE) types: UICC, embedded SE or secure micro SD card. The document also deals with aspects of a mobile contactless payment transaction and the technical and security requirements.

After an analysis of specifications and guidelines from industry bodies such as EMVCo, GlobalPlatform and Mobey Forum to ensure that existing work in this area was leveraged, a preliminary version of this document was made available for public consultation in April 2011. When the external consultation of this work closed on 17 June 2011, the
had received 31 sets of comments, all of which are currently being processed.

Once the new document goes live, it will enable the quick development and implementation of mobile solutions by promoting the use of open standards; describing the roles of stakeholders; outlining the position of the
in relation to other industry bodies; and recommending an adequate level of security for the whole mobile payment value chain in order to establish confidence in this environment.

The
is committed to supporting equally both contactless and remote m-payments. Within this latter environment, the
has been analysing use cases for mobile remote card and
Credit Transfer (
) payments. Work so far has identified a number of gaps with respect to features needed such as confirmation to the beneficiary that a transaction has been undertaken. This work will be integrated into the second edition of the '
White Paper on Mobile Payments' which is scheduled for release by year-end 2011.This document will also provide a high-level mobile wallets description by the
.

What next?

Interoperability and security of the m-payments infrastructure across Europe continues to be a key concern for the
. In a similar approach to the contactless m-payments interoperability implementation guidelines, the
will be developing a framework for remote m-payments in 2012 covering both
and
Cards. With regard to contactless m-payment activity, the
will maintain its interoperability guidelines to ensure appropriate alignment with the
Cards Framework and to keep its content state-of-the-art in the rapidly evolving market.

Looking to the future, the
recognises the importance of this ecosystem and the rapid evolution of the technology. It will therefore continue its efforts to reach out and intensify its dialogue with relevant m-payment stakeholders including other industry and standardisation bodies and engaging in public consultations.

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In this article

There has been a lot of activity and media focus on mobile payments (m-payments) over the last twelve months. This has included handset manufacturers announcing the future release of near-field-communication (NFC) capable mobile phones to platform providers launching e-payment wallets. The wide-spread industry engagement is important to establish confidence in this emerging ecosystem. It is however, important to acknowledge that much work is still required. Without doubt, it takes time to transition from a trial within a contained environment with defined stakeholders and limited risk, to a global mass market deployment that requires significant investments and multiple commercial relationships. In this article, Dag-Inge Flatraaker provides
Newsletter readers with an overview of the challenges faced by m-payment stakeholders and reports on the imminent release of the 'Mobile Contactless
Card Payments Interoperability Implementation Guidelines' developed by the European Payments Council (
), as well as the soon-to-be published second edition of the '
White Paper on Mobile Payments'.

Key Information in this Article

Following a public consultation the European Payments Council (
) will publish the final version of the ‘Mobile Contactless
Card Payments Interoperability Implementation Guidelines’ in the fourth quarter of 2011.

These guidelines will enable the quick development of mobile solutions by:

Promoting open standards.

Describing key stakeholder roles.

Positioning
responsibilities in relation to other industry bodies.

Recommending adequate security levels for mobile payment value chain.

In 2012, the
will develop the ‘Mobile Remote Payments Interoperability Implementation Guidelines’ covering both
Credit Transfer and
Cards.

Also by end 2011, the
will publish the second edition of the ‘
White Paper on Mobile Payments’. This updated version will include a new section on remote mobile payments as well as a high level mobile wallets description.